How the dragon, the elephant and the tiger evolved
As Prime Minister Narendra Modi continues his visits to China and South Korea, both far more industrialised and prosperous than India, here’s how the two countries have raced ahead of India since 1980. Some points to ponder over:
1. GDP: Way back in 1980, the GDP of India and China were about the same when measured in current US dollars. Both countries were roughly $189-billion economies, while South Korea was a little more than one-third their size with a GDP of $68 billion. Now, the Chinese economy is four times the size of India’s while the Korean economy is about two-third the size of the Indian economy.
This happened because the Chinese grew almost at twice the rate of India during the 33-year period. The Chinese economy expanded at a compounded average annual rate (CAGR) of nearly 13 per cent between 1980 and 2013, according to World Bank data. The South Korean economy grew at a CAGR of a little more than 9 per cent during the period while India grew at a little over seven per cent. The size of the Chinese economy was estimated at $9.2 trillion in 2013, the Indian economy at $1.9 trillion and the South Korean economy at $1.3 trillion.
If one takes a longer period average, say, from 1960, then the South Korean economy grew most rapidly at a CAGR of 12 per cent, the Chinese at ten per cent and the Indian economy at eight per cent.
2. Per capita GDP: This is a better measure of the progress an economy has made than going by the growth of the total economy. In 1980, the per capita GDP of China was way lower than India’s. The Koreans were much wealthier than the Chinese and the Indians, thanks to a smaller population as well as rapid industrialisation following the Korean war of the 1950s. China’s per capita GDP in 1980 was $193 in current US dollars, while India’s was much higher at $271, but South Korea was way ahead at $1,778.
In 2013, the Koreans continued to be far wealthier than the Indians and the Chinese with a per capita GDP of $25,977. China raced ahead of India to take its per capita GDP to $6,807 in 2013. The per capita GDP in India climbed to just $1,497 in 2013. It may be noted that per capita GDP grew the slowest in India, among the three nations at a CAGR of five per cent. In comparison, it rose in China at 11 per cent, and this growth would have also been helped by population control measures. In South Korea, the per capita GDP grew at a CAGR of eight per cent.
3. Structure of the economy: India continues to have a much larger share of agriculture in its GDP than China and South Korea, even though it has declined since 1983. Agriculture (value added) was about 18 per cent of the Indian economy in 2013, down from 35 per cent in 1980, the World Bank estimated. In comparison, the share of agriculture in South Korea’s GDP was a miniscule 2.3 per cent, down from 15 per cent in 1980. In China too, the share of agriculture in its economy has fallen drastically from 30 per cent in 1980 to ten per cent in 2013.
The share of value added manufacturing in India’s GDP has stagnated – it was 16 per cent in 1980 and it moved up just a percentage point to 17 per cent in 2013. In South Korea, it moved up from 23 per cent in 1980 to 31 per cent in 2013. In fact, the share of value added manufacturing in South Korea’s GDP has been above 30 per cent since 2010. In China, surprisingly, despite the scaling up, the share of value added manufacturing in its GDP declined from 40 per cent in 1980 to 32 per cent in 2013. The share of manufacturing in China’s GDP ranged between 35 per cent and 40 per cent from 1971 to 1984. China has also experienced the sharpest increase in the share of services in its GDP between 1980 and 2013.
4. Merchandise exports: In 1980, the value of merchandise exports from China and South Korea were about the same. In the following years, China built up large manufacturing facilities and became the factory of the world. That helped it become the world’s largest manufacturer of many items and also the world’s largest exporter. The value of China’s exports is larger than the size of the Indian economy currently.
China exported goods worth $2.2 billion in 2013 and about 94 per cent of it was manufactured goods. The same year, South Korea exported goods worth $600 billion, with manufactured goods making up 86 per cent of the exports. In comparison, India exported goods worth only $315 billion in 2013, with manufactured goods making up just 62 per cent of these exports. In 1980, when China and South Korea were exporting goods worth $17-18 billion, India’s exports were only $8 billion.
5. Population: China was the most populous country in 1980, and it remains so. China’s population was 40 per cent larger than India’s then. But India has narrowed the gap, as population in India grew almost twice as fast as China’s. Now, China’s population is just eight per cent larger than India’s. The population of India grew at 1.8 per cent on a CAGR basis during this period, against China’s one per cent and South Korea’s 0.8 per cent.
Thus, India’s population grew 80 per cent from 1980 to 1.25 billion in 2013, while China’s population rose 38 per cent to 1.36 billion and South Korea’s grew 32 per cent to 0.5 billion.